This goes to recent statement from other industrial producers…
“Davidson submits”
Keep an eye on “Dr.Copper”.
Dennis Gartman, Doug Kass and other traders focus on this for fundamental changes in the direction of the markets. The cost of production is variously pegged between $1.50-$2.00lb with $1.75lb often mentioned. Copper being fundamental to the transfer of electricity for buildings, machinery, transportation and construction is often used to signal changes in economic activity and has the moniker “Dr. Copper”.
Copper’s trend as reflected in Freeport McMoran (FCX) and the commodity appears to have begun a new uptrend. This bears watching.
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My Thoughts (not Davidson’s):
“Inventory destocking” has been a theme lately. The trend (running inventories to very low levels) has destroyed earnings for chemical producers like Dow Chemical (DOW), BASF (BASF) and caused commodity prices to plummet (people who are not producing things aren’t buying the ingredients).
Data like this also suggests when the global economy turns (there is evidence the free fall is abating) with inventory levels next to zero, we could see an explosion of orders and manufacturing activity. China has a stimulus package it enacted that is building everything under the sun and the US one, while diminutive in statue (and eventual effectiveness) will increase activity here somewhat.
Disclosure (“none” means no position):Long Dow, none
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